WorkCover New South Wales v Picton Truck and Trailer Repairs Pty Ltd [2003] NSWSC 859 | Case summary

3937/03 WORKCOVER NEW SOUTH WALES v PICTON TRUCK AND TRAILER REPAIRS PTY LTD (de-registered) JUDGMENT 1 By its originating process, the plaintiff sought the reinstatement of the defendant which was de-registered by the Australian Securities and Investments Commission and the appointment of Keith Richard Aiken as a director. 2 The Corporations Act 2001 (Cth), s 601AH(2) provides, relevantly for present circumstances, that the court may make an order that ASIC reinstate the registration of a company if an application for reinstatement is made to the court by a person aggrieved by the deregistration and the court is satisfied that it is just that the company's registration be reinstated. 3 Mr Aiken appeared in opposition to the application. He was the former sole director, secretary and shareholder of the defendant. He has a right to be heard (Re Peter Conyers Holdings Pty Ltd (1996) 14 ACLC 1835 at 1849, Casali v Crisp (2001) 165 FLR 79 at 81). 4 On 2 March 2001, it was resolved by the creditors of the defendant that it be wound up. On 24 October 2002, the liquidator convened the final meeting of the defendant, presented the final accounts and gave notification of his resignation as liquidator. The defendant was deregistered on 30 January 2003. The application for reinstatement was made on 23 July 2003. 5 The defendant was insolvent. At the time of the presentation of the final accounts it had total assets of $3,994.58 and total debts of $157,145.80. 6 The liquidator consented to the reinstatement of the defendant upon receipt of an indemnity as to statutory costs to a maximum of $1,000. ASIC provided its standard letter of non-opposition upon payment of its fees of $434. I do not regard those positions as determinative. 7 Prior to the defendant effecting a workers' compensation policy of insurance, a workman was injured at premises at 25 Henry Street, Picton. He made a claim upon the plaintiff under the uninsured liability and indemnity scheme contained in Div 6 of Pt 4 of the Workers Compensation Act 1987. He named Keith's Quality Equipment as his employer. The plaintiff admitted liability and ultimately made payments totalling $33,724.60. 8 In November 1998, the plaintiff was informed that the injured workman was employed by Keith Truck & Trailer Repairs of 25 Henry Street, Picton. On 31 October 2001, the plaintiff served a notice seeking reimbursement of the moneys paid to the workman from Driscoll Holdings Pty Ltd trading as Keith Truck & Trailer Repairs under the Workers Compensation Act 1987, s 145(1) which provides that the WorkCover Authority of New South Wales may serve on a person who in its opinion was an employer, a notice requiring that person to reimburse the WorkCover Authority Fund an amount specified in the notice. 9 Thereafter, the plaintiff commenced proceedings in the Local Court against Driscoll Holdings Pty Ltd. By its defence filed on 7 February 2002, Driscoll Holdings Pty Ltd alleged that it had never been the workman's employer. On 4 June 2002, the solicitors for Driscoll Holdings Pty Ltd asserted that the defendant was the employer and it was in voluntary administration. 10 The latter statement was inaccurate as the defendant was then in liquidation. However, the plaintiff was put on notice that there were problems associated with the liquidity of the defendant. If the defendant was put in liquidation, the plaintiff would need to consider whether it should lodge a proof of debt as a future claimant against the defendant in terms of the Corporations Act 2001 (Cth), s 553(1). There was no evidence of any such investigation. 11 It was submitted that had the plaintiff made inquiry and ascertained that the defendant was in liquidation, it would have been duplicitous to lodge a proof of debt. I do not accept that submission. In my view, the plaintiff was entitled to pursue its rights against the defendant in the alternative to its claim against Driscoll Holdings Pty Ltd should the allegation that the defendant was the employer prove to be correct. 12 On 4 June 2002, the Local Court proceedings against Driscoll Holdings Pty Ltd were adjourned to enable it to make application to the Workers Compensation Commission for determination of its liability in terms of the Workers Compensation Act 1987, s 145(3). That application was not made until 2 October 2002. 13 On 24 January 2003, the Workers Compensation Commission determined that the workman was not employed by Driscoll Holdings Pty Ltd. 14 On 4 March 2003, the plaintiff issued a reimbursement notice against Mr Aiken personally under the Workers Compensation Act 1987, s 145(1). On 27 March 2003, Mr Aiken's solicitors wrote to the plaintiff stating that it was his contention, as the plaintiff had been previously advised, that the workman was employed by the defendant and that these facts had been fully canvassed before the Workers Compensation Commission in January 2003. A draft application under s 145(3) for determination of liability by the Workers Compensation Commission was thereafter served on the plaintiff whose solicitors informed Mr Aiken, on 8 April 2003, that it did not intend to rely upon the s 145 notice. 15 On 17 April 2003, the plaintiff was informed by the former liquidator of the defendant that the liquidation had been finalised on 24 October 2002 and there were no assets of the defendant available to allow any claims from unsecured creditors. 16 Mr Aiken is 69 years of age. In April 2002, he suffered a heart attack. In July 2002, he suffered a significant injury to his right hand in an industrial accident. In June 2003, he suffered a stroke. In August 2003, he sustained a head injury in a motor vehicle accident. He suffers from sleep apnoea and is connected to a respirator every night. He suffers from diabetes and takes daily insulin injections. He suffers from major depression and hypertension. He is in constant pain, suffers shortness of breath, is unable to walk long distances and is easily tired. He needs lengthy rest periods. He has difficulty in concentrating. He is unable to drive a motor vehicle. 17 The Workers Compensation Act 1987, s 145A(1) is in the following terms: "If a corporation is liable to reimburse the Authority an amount for a payment made under the Scheme and the amount is not recoverable from the corporation, the Authority is entitled to recover the amount from a person who was a culpable director of the corporation at the relevant time."

Mr Aiken was a culpable director in terms of s 145A(4) because he was a director of the defendant at a time when it did not have a policy of insurance covering it against liability for injury to the workman. 18 It is a prerequisite to recovery against a culpable director that the corporation of which he was a director is liable to reimburse the Authority. That liability only arises if a notice is served on the corporation under the Workers Compensation Act 1987, s 145. The plaintiff sought the reinstatement of the defendant in order to serve such a notice to ground recovery from Mr Aiken. 19 In terms of the Corporations Act 2001 (Cth), s 601AH(2) the plaintiff must first establish that it is a person aggrieved by the deregistration of the defendant. It has been said that the concept of a person aggrieved in this context is of wide import (Deputy Commissioner of Taxation v Lanstel Pty Ltd (1996) 22 ACSR 314). In Attorney- General of Gambia v N'Jie [1961] AC 617 at 634 the Privy Council advised: "The words "person aggrieved" are of wide import and should not be subjected to a restrictive interpretation. They do not include, of course, a mere busybody who is interfering in things which do not concern him: but they do include a person who has a genuine grievance because an order has been made which prejudicially affects his interests." 20 Nonetheless, the plaintiff must establish that it is aggrieved by the deregistration. It must show that its interests have been, or are likely to be, prejudicially affected by the cancellation of registration (Re Waldcourt Investment Co Pty Ltd (1986) 11 ACLR 7 at 12). 21 The plaintiff had no claim against the defendant when it was deregistered. A claim can only arise if and when it serves a notice on the defendant under the Workers Compensation Act 1987, s 145. It did not, in my view, suffer any injury or damage in a legal sense, or otherwise suffer any legal grievance, as a consequence of the defendant's deregistration. 22 The position of the plaintiff is analogous to that of the appellant in GIS Electrical Pty Ltd v Melsom (2002) 43 ACSR 481. It was the major unsecured creditor of the deregistered company and sought reinstatement so that an inquiry could be held as to the liquidator's conduct. Any benefit from restitution that might have been ordered upon such inquiry could not have benefited the appellant as the secured creditor, alone, would have been entitled to any augmentation of the assets of the company. 23 Steytler J, with whom the other members of the Western Australian Court of Appeal agreed, analysed the authorities at 492-494. His Honour concluded that the appellant had no proprietary or pecuniary interest in the outcome of the inquiry, nor was it suggested that it had been injured or damaged in a legal sense or that it had otherwise suffered any legal grievance as a consequence of the company's deregistration. 24 So far as the second requirement of the Corporations Act 2001 (Cth), s 601AH(2) is concerned, it is normally not just to reinstate an insolvent company so that issues can be litigated that were not clearly signalled at the time of deregistration, a fortiori when such reinstatement would increase its debt (Casali at 83 citing Payne v Wizard Industries Pty Ltd (1997) 24 ACSR 277 and Denis v McMahon (1989) 7 ACLC 283). On deregistration, the defendant had a deficiency of shareholders' funds of $153,151.22. The claim by the plaintiff would increase this deficiency. 25 In Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 34 ACSR 232, Austin J took the view that it was just to reinstate a company to enable it to be joined by ACCC in proceedings against its holding company alleging contraventions of the price-fixing and market sharing provisions of the Trade Practices Act 1974 (Cth). His Honour took the view that it was in the public interest for ACCC to seek remedies against companies alleged to have contravened those provisions and that the public interest outweighed prejudice to the company by its reinstatement. 26 There is something to be said for the notion that it is in the public interest for the plaintiff to recover workers' compensation payments made on behalf of uninsured employers from them and, in the event that a corporate employer is unable to pay, from its directors. 27 There is also something to be said for the proposition that since notice to a corporate uninsured employer is a prerequisite to liability in its directors, a deregistered corporate employer should be reinstated to enable the notice to be given. 28 In Re Austral Group Investment Management Ltd [1993] 2 NZLR 692 a company was reinstated for the purpose of being wound up in circumstances where it was a prerequisite to bringing action against the directors of the company that an order for its winding up be made. 29 However, these considerations only arise if the applicant for the reinstatement of registration of a company is a person aggrieved by its deregistration and that requires some interest that existed at the time of deregistration to have been adversely affected by the deregistration. In the instant circumstances no such interest existed. 30 In GIS Electrical, Steytler J went on at 495 to indicate that the appellant's delay in bringing its application was a matter to be taken into account in the exercise of discretion under the Corporations Act 2001 (Cth), s 601AH(2). 31 It was delay on the part of the plaintiff, when it was put on notice that the winding up of the defendant was a possibility, that led to its failure to establish an interest affected in a legal sense upon deregistration of the defendant. There was further unexplained delay on the plaintiff's part in bringing the current application. 32 The plaintiff is vested with powers of recovery of workers' compensation payments. Those powers may be said to be vested in it in the public interest. Those powers should, however, be exercised with expedition. It is not in the public interest to seek the reinstatement of corporate employers at a late stage in order to exercise those powers. 33 If I be wrong in my view that the plaintiff was not an aggrieved person within the meaning of the Corporations Act 2001 (Cth), s 601AH(2), I would exercise my discretion against the reinstatement of the defendant on the basis of the unexplained delay by the plaintiff in seeking to exercise its powers. 34 I should say that I do not regard the medical condition of Mr Aiken as a matter relevant to the question of reinstatement of the defendant. Its relevance lies in opposition to any order that he be appointed a director, should reinstatement have been ordered.

WorkCover New South Wales v Picton Truck and Trailer Repairs Pty Ltd

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